Revitalized Macau tourism rests on government and casino operators

Improved infrastructure greatly needed too.

It has been noted that in terms of tourism, it will be easier for Macau to change than for Hong Kong, as there is less political and social debate over policy.

According to a research note from CLSA, there are seven main parties that could enact measures to boost tourism: the government and the six concession holders. CLSA flags six recommendations: four for the government and two for the casino operators.

First, deliver a more strategic development plan. The central and Macau governments’ goal is to transform Macau into a global tourism and leisure centre, which involves diversification.

This is where the guidance ends. CLSA believes the government needs to set more concrete targets and create a clearer framework for those companies investing in the leisure sector, namely the gaming companies. Lack of visibility on gaming tables is unreasonable given the companies are investing around US$3bn on average for each new project.

Here's more from CLSA:

Desperately needs to improve infrastructure. Despite the boom times in Macau for the gaming companies and the government, they have reinvested little into the enclave’s infrastructure.

Yet, as time passes we are getting closer to the opening of the HK/Macau/Zhuhai bridge, the lightrail system and the second ferry terminal. We would also welcome simple improvements, such as pedestrian walkways between the various hotels and resorts on the Peninsula and on Cotai.

Clarity on concession renewals. Companies continue to invest billions into non-gaming pursuits which are subsidised by gaming returns. The government should provide some visibility on concession renewals or jeopardise future investment. We believe the government will extend the concessions by five years before it considers more major changes.

Reduce VIP tax. VIP revenue fell by 56% from a peak of US$30bn to our estimate of US$12bn this year. The biggest loser is the Macau government as it takes a 39% cut of every dollar lost in the VIP rooms. Part of the decline is due to customers shifting to other locations where commissions are higher because of the lower gaming tax. Lowering VIP taxes would further stem Macau losing more market share.

More non-gaming amenities and events. Macau was envisioned as being the Las Vegas of the East, but aside from gaming and retail, not much has changed in 14 years. It needs more hotel rooms, convention space, family attractions, concerts and nightclubs.

Greater cooperation. The six gaming companies have sufficient reserves to help the government with various infrastructure projects - such as improving the connectivity between the resorts with elevated and air conditioned walkways. As junkets shift focus to other markets, more direct-VIP business is being done. Sharing data on bad debts would help manage credit risks.